Public Act 90-0319 of the 90th General Assembly
Public Act 90-0319
SB693 Enrolled LRB9003021DNmb
AN ACT concerning the deposit of public funds.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Intergovernmental Cooperation Act is
amended by changing Section 15 as follows:
(5 ILCS 220/15)
Sec. 15. Authorized investments. In addition to other
investments authorized by law, an intergovernmental risk
management entity created under this Act with assets of at
least $5,000,000 and adopting an investment policy under
Section 16 of this Act may invest in any combination of the
following:
(1) the common stocks listed on a recognized
exchange or market;
(2) stock and convertible debt investments, or
investment grade corporate bonds, in or issued by any
corporation the book value of which shall not exceed 5%
of the total intergovernmental risk management entity's
investment account at book value in which those
securities are held, determined as of the date of the
investment, provided that investments in the stock of any
one corporation shall not exceed 5% of the total
outstanding stock of the corporation and that the
investments in the convertible debt of any one
corporation shall not exceed 5% of the total amount of
such debt that may be outstanding;
(3) the straight preferred stocks or convertible
preferred stocks and convertible debt securities issued
or guaranteed by a corporation whose common stock is
listed on a recognized exchange or market;
(4) mutual funds or commingled funds that meet the
following requirements:
(i) the mutual fund or commingled fund is
managed by an investment company as defined and
registered under the federal Investment Company Act
of 1940 and registered under the Illinois Securities
Law of 1953 or an investment adviser as defined
under the federal Investment Advisers Act of 1940;
(ii) the mutual fund has been in operation for
at least 5 years; and
(iii) the mutual fund has total net assets of
$250,000,000 or more;
(5) commercial grade real estate located in the
State of Illinois.
Any investment advisor retained by the board of the
intergovernmental risk management entity must be a fiduciary,
who has the power to manage, acquire, or dispose of any asset
of the intergovernmental risk management entity, has
acknowledged in writing that he or she is a fiduciary with
respect to the intergovernmental risk management entity and
that he or she has read and understands the intergovernmental
risk management entity's investment policy and will adhere to
all of the principles and standards set forth in that policy,
and is one or more of the following:
(i) registered as an investment adviser under the
federal Investment Adviser Act of 1940;
(ii) registered as an investment adviser under the
Illinois Securities Law of 1953;
(iii) a bank, as defined in the federal Investment
Adviser Act of 1940;
(iv) an insurance company authorized to transact
business in this State.
Nothing in this Section shall be construed to authorize
an intergovernmental risk management entity to accept the
deposit of public funds except for risk management purposes.
(Source: P.A. 89-592, eff. 8-1-96.)
Section 10. The Public Funds Investment Act is amended
by changing Section 2 as follows:
(30 ILCS 235/2) (from Ch. 85, par. 902)
Sec. 2. Authorized investments.
(a) Any public agency may invest any public funds as
follows:
(1) in bonds, notes, certificates of indebtedness,
treasury bills or other securities now or hereafter
issued, which are guaranteed by the full faith and credit
of the United States of America as to principal and
interest;
(2) in bonds, notes, debentures, or other similar
obligations of the United States of America or its
agencies;
(3) in interest-bearing savings accounts,
interest-bearing certificates of deposit or
interest-bearing time deposits or any other investments
constituting direct obligations of any bank as defined by
the Illinois Banking Act;
(4) in short term obligations of corporations
organized in the United States with assets exceeding
$500,000,000 if (i) such obligations are rated at the
time of purchase at one of the 3 highest classifications
established by at least 2 standard rating services and
which mature not later than 180 days from the date of
purchase, (ii) such purchases do not exceed 10% of the
corporation's outstanding obligations and (iii) no more
than one-third of the public agency's funds may be
invested in short term obligations of corporations; or
(5) in money market mutual funds registered under
the Investment Company Act of 1940, provided that the
portfolio of any such money market mutual fund is limited
to obligations described in paragraph (1) or (2) of this
subsection and to agreements to repurchase such
obligations.
(a-1) In addition to any other investments authorized
under this Act, a municipality may invest its public funds in
interest bearing bonds of any county, township, city,
village, incorporated town, municipal corporation, or school
district. The bonds shall be registered in the name of the
municipality or held under a custodial agreement at a bank.
The bonds shall be rated at the time of purchase within the 4
highest general classifications established by a rating
service of nationally recognized expertise in rating bonds of
states and their political subdivisions.
(b) Investments may be made only in banks which are
insured by the Federal Deposit Insurance Corporation. Any
public agency may invest any public funds in short term
discount obligations of the Federal National Mortgage
Association or in shares or other forms of securities legally
issuable by savings banks or savings and loan associations
incorporated under the laws of this State or any other state
or under the laws of the United States. Investments may be
made only in those savings banks or savings and loan
associations the shares, or investment certificates of which
are insured by the Federal Deposit Insurance Corporation. Any
such securities may be purchased at the offering or market
price thereof at the time of such purchase. All such
securities so purchased shall mature or be redeemable on a
date or dates prior to the time when, in the judgment of such
governing authority, the public funds so invested will be
required for expenditure by such public agency or its
governing authority. The expressed judgment of any such
governing authority as to the time when any public funds will
be required for expenditure or be redeemable is final and
conclusive. Any public agency may invest any public funds in
dividend-bearing share accounts, share certificate accounts
or class of share accounts of a credit union chartered under
the laws of this State or the laws of the United States;
provided, however, the principal office of any such credit
union must be located within the State of Illinois.
Investments may be made only in those credit unions the
accounts of which are insured by applicable law.
(c) For purposes of this Section, the term "agencies of
the United States of America" includes: (i) the federal land
banks, federal intermediate credit banks, banks for
cooperative, federal farm credit banks, or any other entity
authorized to issue debt obligations under the Farm Credit
Act of 1971 (12 U.S.C. 2001 et seq.) and Acts amendatory
thereto; (ii) the federal home loan banks and the federal
home loan mortgage corporation; and (iii) any other agency
created by Act of Congress.
(d) Except for pecuniary interests permitted under
subsection (f) of Section 3-14-4 of the Illinois Municipal
Code or under Section 3.2 of the Public Officer Prohibited
Practices Act, no person acting as treasurer or financial
officer or who is employed in any similar capacity by or for
a public agency may do any of the following:
(1) have any interest, directly or indirectly, in
any investments in which the agency is authorized to
invest.
(2) have any interest, directly or indirectly, in
the sellers, sponsors, or managers of those investments.
(3) receive, in any manner, compensation of any
kind from any investments in which the agency is
authorized to invest.
(e) Any public agency may also invest any public funds
in a Public Treasurers' Investment Pool created under Section
17 of the State Treasurer Act. Any public agency may also
invest any public funds in a fund managed, operated, and
administered by a bank, subsidiary of a bank, or subsidiary
of a bank holding company or use the services of such an
entity to hold and invest or advise regarding the investment
of any public funds.
(f) To the extent a public agency has custody of funds
not owned by it or another public agency and does not
otherwise have authority to invest such funds, the public
agency may invest such funds as if they were its own. Such
funds must be released to the appropriate person at the
earliest reasonable time, but in no case exceeding 31 days,
after the private person becomes entitled to the receipt of
them. All earnings accruing on any investments or deposits
made pursuant to the provisions of this Act shall be credited
to the public agency by or for which such investments or
deposits were made, except as provided otherwise in Section
4.1 of the State Finance Act or the Local Governmental Tax
Collection Act, and except where by specific statutory
provisions such earnings are directed to be credited to and
paid to a particular fund.
(g) A public agency may purchase or invest in repurchase
agreements of government securities having the meaning set
out in the Government Securities Act of 1986 subject to the
provisions of said Act and the regulations issued thereunder.
The government securities, unless registered or inscribed in
the name of the public agency, shall be purchased through
banks or trust companies authorized to do business in the
State of Illinois.
(h) Except for repurchase agreements of government
securities which are subject to the Government Securities Act
of 1986, no public agency may purchase or invest in
instruments which constitute repurchase agreements, and no
financial institution may enter into such an agreement with
or on behalf of any public agency unless the instrument and
the transaction meet the following requirements:
(1) The securities, unless registered or inscribed
in the name of the public agency, are purchased through
banks or trust companies authorized to do business in the
State of Illinois.
(2) An authorized public officer after ascertaining
which firm will give the most favorable rate of interest,
directs the custodial bank to "purchase" specified
securities from a designated institution. The "custodial
bank" is the bank or trust company, or agency of
government, which acts for the public agency in
connection with repurchase agreements involving the
investment of funds by the public agency. The State
Treasurer may act as custodial bank for public agencies
executing repurchase agreements. To the extent the
Treasurer acts in this capacity, he is hereby authorized
to pass through to such public agencies any charges
assessed by the Federal Reserve Bank.
(3) A custodial bank must be a member bank of the
Federal Reserve System or maintain accounts with member
banks. All transfers of book-entry securities must be
accomplished on a Reserve Bank's computer records through
a member bank of the Federal Reserve System. These
securities must be credited to the public agency on the
records of the custodial bank and the transaction must be
confirmed in writing to the public agency by the
custodial bank.
(4) Trading partners shall be limited to banks or
trust companies authorized to do business in the State of
Illinois or to registered primary reporting dealers.
(5) The security interest must be perfected.
(6) The public agency enters into a written master
repurchase agreement which outlines the basic
responsibilities and liabilities of both buyer and
seller.
(7) Agreements shall be for periods of 330 days or
less.
(8) The authorized public officer of the public
agency informs the custodial bank in writing of the
maturity details of the repurchase agreement.
(9) The custodial bank must take delivery of and
maintain the securities in its custody for the account of
the public agency and confirm the transaction in writing
to the public agency. The Custodial Undertaking shall
provide that the custodian takes possession of the
securities exclusively for the public agency; that the
securities are free of any claims against the trading
partner; and any claims by the custodian are subordinate
to the public agency's claims to rights to those
securities.
(10) The obligations purchased by a public agency
may only be sold or presented for redemption or payment
by the fiscal agent bank or trust company holding the
obligations upon the written instruction of the public
agency or officer authorized to make such investments.
(11) The custodial bank shall be liable to the
public agency for any monetary loss suffered by the
public agency due to the failure of the custodial bank to
take and maintain possession of such securities.
(i) Notwithstanding the foregoing restrictions on
investment in instruments constituting repurchase agreements
the Illinois Housing Development Authority may invest in, and
any financial institution with capital of at least
$250,000,000 may act as custodian for, instruments that
constitute repurchase agreements, provided that the Illinois
Housing Development Authority, in making each such
investment, complies with the safety and soundness guidelines
for engaging in repurchase transactions applicable to
federally insured banks, savings banks, savings and loan
associations or other depository institutions as set forth in
the Federal Financial Institutions Examination Council Policy
Statement Regarding Repurchase Agreements and any regulations
issued, or which may be issued by the supervisory federal
authority pertaining thereto and any amendments thereto;
provided further that the securities shall be either (i)
direct general obligations of, or obligations the payment of
the principal of and/or interest on which are unconditionally
guaranteed by, the United States of America or (ii) any
obligations of any agency, corporation or subsidiary thereof
controlled or supervised by and acting as an instrumentality
of the United States Government pursuant to authority granted
by the Congress of the United States and provided further
that the security interest must be perfected by either the
Illinois Housing Development Authority, its custodian or its
agent receiving possession of the securities either
physically or transferred through a nationally recognized
book entry system.
(j) In addition to all other investments authorized
under this Section, a community college district may invest
public funds in any mutual funds that invest primarily in
corporate investment grade or global government short term
bonds. Purchases of mutual funds that invest primarily in
global government short term bonds shall be limited to funds
with assets of at least $100 million and that are rated at
the time of purchase as one of the 10 highest classifications
established by a recognized rating service. The investments
shall be subject to approval by the local community college
board of trustees. Each community college board of trustees
shall develop a policy regarding the percentage of the
college's investment portfolio that can be invested in such
funds.
Nothing in this Section shall be construed to authorize
an intergovernmental risk management entity to accept the
deposit of public funds except for risk management purposes.
(Source: P.A. 87-288; 87-940; 87-1098; 88-45; 88-355; 88-555,
eff. 7-27-94.)
Section 99. Effective date. This Act takes effect upon
becoming law.